Supply Chain bottleneck threaten US consumers

 

If you are just now hearing of supply chain bottlenecks then perhaps you were on a longer flight to outer space than the one that Jeff Bezos provided to Star Trek actor William Shatner.

With the upcoming winter holidays, gift givers are being advised to order, and shop, early so as not to disappoint their recipients; but, while Christmas and Hanukkah are fast approaching, the culprit is not Scrooge, but the closures of factories abroad, especially those in Asia, and Europe, all due to the Covid pandemic that forced them.

While John and Jane Q. Public often identifies Chinese imports with the local dollar store, the reality is far more complex with everything from computer chips to sneakers being imported from destinations as far flung as Bombay to Hong Kong.

Another unknown is that many well known products are either partially or completely made of foreign parts, or designed here, and made in those distant locales.

Adding to the mix is that during the mandated lockdowns, and store closures, many Americans turned on their laptops, smartphones, and desktops to order a myriad of things from breadmakers to home improvement items, and all manner of gizmos and gadgets, with the firm expectation that they would be delivered within two days.

What that increased demand did was to create pressure to deliver, and the resulting bottleneck has created a myriad or problems, many that seem insurmountable, and have created shortages key areas, new cars especially, since they contain those microchips that tell us not only how to get to our destinations, but also to avoid hitting our children’s tricycles inconveniently parked behind our minivans.

Getting goods from point to point has been complicated by the lack of truckers, especially long haulers to get the goods from the port, or warehouse, to our homes. This dearth of truckers has been keenly felt by our British cousins whose trucks have almost ground to a halt.

Labor, therefore, is vital to push ahead, but many experienced workers have retired, or feel the desire to do less punishing hours, and workloads; now almost doubled in some key areas.

There are now 4.3 million less workers than there were in February of 2020; and, the workforce shrank in September from 63.3 to 61.6. Luring them back is part and parcel of any increase in working hours, say many economists.

Transportation problems here have grown so bad that according to The New York TImes, “Home Depot, Costco, and Walmart have taken to chartering their own ships to move products across the Pacific Ocean.”

While that might seem to be good enough, waiting times at ports can exceed 10 days,, in some cases, to have enough workers to move the goods. And, this has extended to the same patterns of delays and closures, across the US, in warehouses, and railroad yards.

The twinned problems for consumers are not merely shortages of goods, but higher prices threatening to drain those Covid inspired cash reserves, and last week, “Consumer prices rose 0.4 percent in September and 5.4 percent in the 12 months leading into it,” reported The Hill, citing figures from the Labor Department.

Riding on the heels of the increase was the effect on tightly budgeted household incomes in key areas, such as food, energy and housing costs. That lump of coal for naughty children’s Christmas stockings, might be needed to heat the humble hearth.

While President Biden “met with leaders from corporations, labor unions and trade associations,” on Wednesday, according to The Hill, and announced 24 hour operations for FedEx, UPS and Walmart, seven days a week, including the Port of Los Angeles, the factor of time will be the primary factor of change.

Joe Brusuelas, chief economist at the audit and tax firm, RSM, said in his interview, “At this point there’s not much that the federal government can do to what can accurately be described as a behavioral shock.”

September Jobs report numbers sink and stink

September was supposed to be the month that the US economy would see buoyant numbers that would propel it, ballon like, above the landscape of the Covid pandemic, with its doom and gloom, buoyed aloft by August numbers that said to many, that the nation was well on its way to recovery. Instead Friday’s report from the Labor Dept, showed a miserable 194,000 jobs.

This was in direct contradiction of predictors that said there would be 500,000 expected, and as the old song said, “What a Difference a Day Makes”, played out amongst the desks and offices of the nation’s lawmakers, and of course, the White House where President Biden attempted to minimize the loss and press the need for his Build Back Better program, now stick in the chutes of Congress.

There were strong winds which pulled that balloon down, and chiefly of them was the dwindling presence of women in the workforce, who with the push towards in person learning for their children, were expected to return to work in droves. 

That did not happen, and furthermore there was a significant decline in local and state school employment.

Another factor was child care itself, an expensive cost for many families, and especially low income families, saw a  trend across the country where there are “child  care deserts,” noted Julia Coronado, president and founder of Macro Policy Perspectives, in Friday’s interview with NPR: leaving many to rely on relatives and parents, a chain that can be weakened with a last minute phone call.

The crushing need for child care so that mothers can return to work is now hamstrung by a decrease in staff.

WAMU’s program 1A, broadcast by National Public Radio, reported that, “According to the Department of Labor, daycare and other childcare jobs are down 10 percent – that’s a decline of nearly 127,000 since the pandemic started..And in a nation where childcare and paid family leave aren’t guaranteed, it’s having devastating effects.”

For those that remain, its parent clients can expect to pay between $20,000 and $30,000 per year for one to two children, depending on geographic area.

Centers also have higher costs in having trained and educated staff, plus facility design and supplemental equipment.

Some census reports indicate that there was a change in women workers from a midsummer rate of 8 million to a drop to 5 million, once schools reopened for in person learning; but, the state and local depression of bus drivers, workers and even teachers, (dissatisfied with the job and, on average, a 5 year drop out rate) might cast doubt on those numbers.

Furthermore, employees who are leaving service jobs in droves, in search of less demanding work, an effort that was helped in some geographic areas, where the extra financial cushion of extended benefits gave them time to consider how they earned their daily bread; and, for many it was not in the kitchen, baking it.

While there was an increase in leisure and hospitality jobs, for September, to the tune of 74,000, and a slight increase in wages to attract seasoned and entry level workers, it was not as wide as in August, when increased vaccinations gave consumer confidence a boost, but a decrease in food and beverage hires made a dent in this month’s numbers.

Perhaps some workers returning to the office needed new clothes, and retail did show a 56,000 increase with a corresponding increase in accessories with a surge of 27,000. With neckties now in abeyance for most male workers, some have suggested that, for women, scarves and jewelry may be making headwinds, as they save for child care, instead of new outfits.

Then again employers are having a hard time luring office workers back to the expansive, and expensive office spaces, especially in Chicago, New York and Los Angeles, with many having become satisfied (especially those without child care) with remote work; and, even the lure of an office cocktail party is not making them bum rush to downtown.

The residual effects on all of those sandwich shops, sushi bars, and burrito stores, offer less and have less employees to serve what once was a scene out of Ben Hur, with legions running in and out at noon. And, as we have seen above they have faced employee exits; and, this has been clearly established in the fast food industry, as many fear a higher chance of Covid infection, working shoulder to shoulder.

As Bloomberg News reported a year ago, teenagers and the elderly, once part of the “key demographics . . . are staying away for health and safety reasons.”

“This is the most dramatic shift that’s happened in the modern history of food service,” said Aaron Allen, chief strategist at restaurant consultancy Aaron Allen & Associates,” last year; a trend that  has continued into 2021.

For traditional office spaces, some employers are redesigning the space in the hope that they can be made safer with wider, and more, open spaces; and, those seeking to climb the corporate ladder want face time, not screen time. But, that may have changed with many workers, especially women, wanting a hybrid that gives them some of both, and less child care costs.

The Labor Dept.noted that its household survey showed that “In September, 13.2 percent of employed persons teleworked because of the coronavirus pandemic, little changed from the prior month. These data refer to employed persons who teleworked or worked at home  for pay at some point in the last 4 weeks specifically because of the pandemic.”

Of course, the hard reality is that there are still 5 million people out of work since the pandemic began almost two years ago and "It's just a bumpy recovery," says Nela Richardson, chief economist at the payroll processing firm ADP. 

"And it's a recovery that's still linked to the pandemic and the delta variant,” she recently told NPR.

Some good news, at least on the surface, was that the unemployment number dipped to 3.8% from 5.2% in August, but as we have pointed out the banner number, or the marquee number, does not say it all.

Labor Force Participation, or LFP, is still a cause for concern and NPR noted, that "that it does seem that a lot of people who are retirement age are opting out rather than staying in the workforce, which is a big, big change from pre-pandemic, when people worked well into their 60s and well after 65," said Tim Fiore, who conducts a monthly survey of factory managers for the Institute for Supply Management,” but, there are just as many that stay, says Fed Chair Jerome Powell, a spry 68.

"The lore is that people don't come out of retirement," Powell said last week during a congressional hearing. "Except I would say, all during the last few years of the very long expansion that ended with the pandemic, we were constantly surprised to the upside on participation, including older people staying in the workforce longer."

How much was the biggest question, and the report says, “The labor force participation rate was little changed at 61.6 percent in September and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020.”

Biden touted the substantial decrease of Black unemployment for September, 7.9%, but on closer inspection it was due to Blacks leaving the workforce rather than gaining employment opportunities, and especially in areas dominated by Black service workers, including fast food, domestic work and healthcare workers, and notably those in long term care and nursing homes.

“The improvement in this month’s unemployment rate is misleading given the decline in the participation rate, in particular when you look at Black men and women,” said economist Valerie Wilson, a director at the Economic Policy Institute to CNBC.com.

“I don’t think that is signaling any acceleration or improvement in the pace of recovery at this point,” Wilson added, noting the difficulty of drawing conclusions about labor market trends from month-to-month changes.”.

Some analysts, especially at the TImes, have tried to spin September as not being so bad and citing that the unemployment rate has decreased faster than it did after the Great Recession of the late 2000’s.

“This represents a remarkably speedy recovery in the labor market — attaining sub-5 percent unemployment a mere 17 months after the end of the deepest recession in modern times. By contrast, in the aftermath of the global financial crisis, the jobless rate did not reach 4.8 percent until January 2016, six and a half years after the technical end of that recession”, they said.

One important distinction is the absence of a worldwide pandemic, in 2008, which has killed hundreds of thousands of people across the globe and reduced the American economy to near ashes. 

That is the key difference between the two poles.

Credence must be given to the Labor Dept, when they, without a figurative shrug, said, “Recent employment changes are challenging to interpret, as pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns.”